Can Jill Soltau rebuild J.C. Penney?

Discussion
JCPenney's partnership with threadUP - Photo: JCPenney
Aug 16, 2019
George Anderson

On J.C. Penney’s second quarter conference call with analysts, CEO Jill Soltau made clear that her job and that of her team was not simply running the department store chain’s business. It was rebuilding it.

The retailer managed to cut its quarterly loss in half even as same-store sales fell six percent (excluding discontinued appliance and furniture sales). However, Penney continues to face multiple challenges, including carrying billions of dollars in debt, the threat of having its stock delisted by the New York Stock Exchange, establishing a point of difference with department store, online and specialty retail competitors, and attracting new generations of customers that it has failed to connect with up until now.

On her call with analysts, Ms. Soltau stressed the size of the hole that Penney dug for itself over the last decade. Understanding this, she said, job one is moving the business into the black.

“I strongly believe that growing sales in an unprofitable way is simply not an option,” said Ms. Soltau (via SeekingAlpha). “The only way to reconstruct a business is through a holistic approach across all the key tenets of strategic, purposeful and effective retailing.”

To return to profitability, Penney has sought to cut down on excess inventory and reduce markdowns. Ms. Soltau said the chain had made progress on both fronts, cutting inventory levels 12.5 percent during the second quarter and changing Penney’s “markdown and clearance cadence … contributing to nearly half of our cost of goods sold improvement this quarter.”

The retailer, which has seen erosion in online sales, has worked to improve gross margins, evident in the recent quarterly results. Penney has improved its merchandise selection while making functional changes in presentation, search and other areas that helped the retailer improve “conversion and customer service scores year-over-year.” 

With more than 80 percent of its total sales made in stores, Penney has focused on making it easier and more fun to shop in its physical locations. Ms. Soltau pointed to new centralized pickup and return areas, a new checkout process and a changing room pilot that Penney is looking to expand. The chain was also able to reduce shrink and improve operating margins by adding associates in high traffic departments.

Penney’s CEO said it will take “innovation, personalization and clear differentiations” to put the retailer in a position to “ultimately drive traffic and capture share of wallet.” She pointed to Penney’s partnership to open thredUP shops within 30 of the chain’s stores as an example. The shops, which will range in size from 500- to 1,000-square-feet, will allow Penney to offer its customers affordable “high-end brands” not typically sold in the chain’s stores while “catering to eco-minded consumers who want more sustainable options in their wardrobe.” 

DISCUSSION QUESTIONS: Do you think Jill Soltau and her team can rebuild J.C. Penney, or was the chain too late in bringing new management on board? Where do you see the greatest areas of need at Penney?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"Jill Soltau and her team have the talent and the will, but time and the tariff trade policy uncertainties are not on their side."
"The main concern is that so many of Penney’s formerly-loyal customers have walked."
"I want to see Jill and Penney’s succeed, we’ve lost too many important retailers already. I wish her all the luck in the world."

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22 Comments on "Can Jill Soltau rebuild J.C. Penney?"


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Ken Lonyai
BrainTrust

Interesting progress but I believe that ultimately it’s futile. I think management is going to hit the wall once it achieves what are obvious fixes. There is no brand appeal. The company has had such a muddled last two decades that the shoppers it needs most have moved on permanently. The stores need expensive makeovers. The web site is average. The shoppers I’ve seen in my local J.C. Penney appear(?) to be in a lower financial tier and are not going to be thredUP customers.

Bottom line: it seems like Jill and her team are making progress in a maze that has no way out.

Art Suriano
BrainTrust
I have strong doubts that Jill Soltau can turn things around for J. C. Penney. The company has floundered far too long with no direction, no definitive identity and therefore no real reason to shop them. They survive because most of their stores are in malls and whatever traffic the mall gets usually allows for some customers to walk through their stores. J. C. Penney needs a significant facelift: 1.) a well thought out and implemented identity/branding campaign complete with a tag line and great advertising, 2.) redesigned stores that create the desire to shop, 3.) merchandise that will impress the customers and as often as possible be exclusive to J. C. Penney, 4.) attractive prices, 5.) excellent customer service.  The problem is: where will they get the money? It’s probably best for them to go down to a few hundred stores and focus on rebuilding the company and eventually building themselves back up. I don’t them see them doing that nor do I see Jill Soltau, who did very little at Joann Fabrics, to be the game-changer. I hope I’m wrong because… Read more »
Neil Saunders
BrainTrust

I would like Jill Soltau to succeed. She has a common-sense approach based on years of solid retail experience. However, as much as I am sure that she can remedy some critical issues like inventory control, cost management and so forth, I think rebuilding the brand will be very difficult.

J.C. Penney needs a complete reformulation. That will be expensive and it will also take a lot of time to implement and for perceptions to filter through to customer behaviors. Given that J.C. Penney has a mountain of debt and is loss-making, time is the very resource the business does not have. This is all the more so if there is a consumer downswing in the near term.

The next six months will be critical. If J.C. Penney pulls some initiatives out of its hat then there is a chance – but I have to say it is a very, very slim one.

Jeff Sward
BrainTrust

Yes, J.C. Penney is late but maybe not terminally late. Yes, the debt is onerous but maybe manageable. The model for reinventing J.C. Penney exists. It’s called Primark. Product. PRICE. Presentation. That’s what the customer sees, feels and responds to. J.C. Penney must demonstrate proof of life ASAP in X number of stores to give confidence to debt holders.

Paula Rosenblum
BrainTrust
Well, Ms. Soltau is right about one thing – these problems are definitely a decade old. People forget that Ron Johnson was brought in to reinvigorate the chain in 2011, and the prior year J.C. Penney had done an enormous stock buyback ($900 million rings a bell) and had spent a couple hundred million on the Liz Claiborne brand. So along came Mr. Johnson, and for reasons we have beaten ad nauseum, the chain barely survived. I did an analysis some years back. The money he wanted to make his changes was never there to reinvent the chain all at once. In fact, if we look at the past decade, all the CEOs played to their own strengths rather than to what the market wanted. Mr. Ullman first spent all that money, then he wanted to hand the reins over to Mr. Johnson. Mr. Johnson pretty much did what had been done at Apple before, just roll out changes, forgetting that this was a chain that already had a market. Then Mr. Ullman brought it… Read more »
Cathy Hotka
BrainTrust

There’s a lot of work to be done here, particularly in merchandising. These stores look daunting — too much product, too much selection, too many SKUs. For Millennials, who are used to seeing five or six items at a time on a computer screen, it’s just overwhelming. Wait — did I just recommend Ron Johnson’s approach?

LAURA RAMIREZ
Guest

Never mind too much square footage. They need to find a way to break up and lease out some of that space. I mean this isn’t novel, it’s the way of retail for several years now. Yet their massive, horrifically merchandised, sad looking stores are all still sitting there with less inventory and price updates. Who cares?

Lee Peterson
BrainTrust

Wait, I remember this when it was called “Ron Johnson.” Maybe she will learn from his mistakes and actually make this turnaround happen, but you get the feeling that the macro forces that now grip modern shopping have long left J.C. Penney behind no matter what genius they bring in. Lemme see, try a “town center” in the middle of the store? That might work. Thanks, Ron.

Rob Gallo
BrainTrust

More power to Jill, but I think it’s too late. I don’t think J.C. Penney has enough of a brand left to be rebuilt given its financial situation. There’s too much to do and not enough time to do it. I suppose it’s possible that younger generations have simply no frame of reference for what J.C. Penney is/was that they could be introduced to whatever the new version of J.C. Penney turns into, but that would likely have to be on a much smaller scale than the size of the current company.

Carol Spieckerman
BrainTrust
J.C. Penney’s revolving door of leadership hasn’t helped its cause. However, Jill Soltau hasn’t been at the helm long enough to take the blame for J.C. Penney’s ongoing woes. She has been given a tough row to hoe. Previous leaders, like the much-maligned Ron Johnson, thought they had the luxury to approach the business more creatively, but underestimated or even ignored fundamental problems. Jill Soltau has inherited an end-of-the-line situation in which the fun and creative elements of the business must be subjugated to hard fundamentals. To her credit, she is making it clear that a slow march to irrelevance, a la Sears, is not an option. No denial at work here. Her data-driven sensibilities are a plus that stand in stark contrast to the whim-driven lurches that defined previous leaders. The thredUP hookup is already a me-too on the heels of Macy’s thredUP announcement just days ago, but that doesn’t necessarily dilute the potential. The main concern is that so many of Penney’s formerly-loyal customers have walked. Unlike Target, whose customers seem to always… Read more »
Mohamed Amer
BrainTrust

Late is so relative. At this point, the actions are drastic but not impossible. On top of the typical retail issues of managing inventory, introducing fresh brands and styles, and enhancing the shopping experience, the J.C. Penney team must clear out some really big boulders: debt refinancing, lackluster online sales, and driving traffic to their physical stores, which is becoming a fundamental issue for mall-based retailers.

Each of these elements need not be fatal; however, simultaneously addressing a cluster of them requires making a series of quick and near perfect decisions with flawless execution. Jill Soltau and her team have the talent and the will, but time and the tariff trade policy uncertainties are not on their side.

Dick Seesel
BrainTrust

Jill Soltau (a former Kohl’s colleague) has the right ideas about applying fundamental ABCs of merchandising to Penney’s problems — product, promotional cadence, and so forth. And hopefully she has filled her team with like-minded, commonsense people. The question is whether she has time for a turnaround.

The situation is akin to the post-Johnson era at J.C. Penney, when Mike Ullman took over the reins again as CEO and went into full survival mode. The company took some big steps backward under Marvin Ellison — the deep dive into major appliances being the most costly — and now Soltau and team have to scramble again. But do the company’s financial stakeholders have the desire to save J.C. Penney again, at a point where the mall-based retail model looks more vulnerable than ever?

Georganne Bender
BrainTrust

It’s easy to be an armchair quarterback and talk about all the things wrong about J.C. Penney. For reasons Paula pointed out so well, the retailer didn’t get to where it is overnight, and it can’t be fixed overnight either.

Jill Soltau and her team are making a difference. She’s not trying to build the ultimate department store, she’s trying to put Penney’s in a place to “ultimately drive traffic and capture its share of wallet.” She’s making progress, but she needs time to dig out of a very large hole that she didn’t create. I want to see Jill and Penney’s succeed, we’ve lost too many important retailers already. I wish her all the luck in the world.

LAURA RAMIREZ
Guest

There’s no place in the landscape for J.C. Penney and this is what kills me about the Sisyphean task which everyone, not just Jill, is mistaking for a Herculean task.

Rich Kizer
BrainTrust

Jill Soltau said: “I strongly believe that growing sales in an unprofitable way is simply not an option, and to cut down on excess inventory and reduce markdowns.” Can’t argue with that. However, we live in a hyper competitive retail world where competitive change is made in minutes and days, not quarters. That means that J.C. Penney must run at least as fast and really faster than their competitors to play the game. In my opinion, Jill Soltau is a brilliant merchant, but the pace of being able to catch up and reposition J.C. Penney, while controlling inventory levels, enhancing margin and minimizing markdowns will be a daunting task.

Phil Rubin
BrainTrust
3 months 19 days ago

At the risk of echoing what seems to be a consensus among BrainTrust members here, I’ll simply say no. J.C. Penney has long since lost its relevance and like others who have failed to rebuild, the headwinds are just too strong and are likely to intensify over the next four to eight quarters. There is nothing special or unique about J.C. Penney other than its struggles.

Kai Clarke
BrainTrust

Too little, too late. JCP is trying to revive a retailing model that is past its prime. Add to this the financial and marketing hole it has to deal with, on top of the logistical nightmare of rapidly outdated, outmoded, expensive, product in their stores and warehouses and you have a recipe for continued failure. JCP needs to have a fire sale, reduce stores, eliminate inventory and restructure itself to be something other than a department store.

gordon arnold
Guest

The 21st century retail business fundamentals have not changed from the past. The tools needed for success have. And so too have the marketing methods and communication imperatives.

I see no ability to address these requirements in the words or actions of the company. The buying of time until the market comes back will not ensure a future. Only understanding the market and getting in front of it will.

Craig Sundstrom
Guest

“…Same-store sales fell six percent.” Sadly, these six words overwhelm everything else.

Cynthia Holcomb
BrainTrust

What a challenge! Jill Soltau is a true merchant to sign up for such an “undertaking.” No pun intended? Too bad JCP has not spent more time focused on selling online. A quick review of the JCPenny.com shopping experience versus some of its online competition (Walmart etc.) yields an interesting outcome. The JCP.com shopper experience, the UX and UI, is actually easier to navigate and the JCP.com offerings are merchandised in a cleaner and easier to shop format than the competition. Focusing on JCP.com is the opportunity to build additional sales in every corner of the internet. Versus the current strategy of dragging customers into old and tired stores requiring millions in upgrades. Live a little JCP! Your “Ace” in the hole, JCP.com.

Shikha Jain
BrainTrust

It’s great to see that Jill Soltau has the courage to turn around this iconic brand. What will be crucial in rebranding is to avoid repeating mistakes from history. For example, if the brand will continue to be about “great deals for premium products” and that is who shops at JCP, then reducing markdowns might be a good short-term strategy to regain profits but questionable on its efficacy long-term.

William Passodelis
Guest
3 months 17 days ago

I wish Ms. Soltau and the team all the best. There is just one thing that really worries me about going forward — the debt! This factor may not allow the needed time.

wpDiscuz
Braintrust
"Jill Soltau and her team have the talent and the will, but time and the tariff trade policy uncertainties are not on their side."
"The main concern is that so many of Penney’s formerly-loyal customers have walked."
"I want to see Jill and Penney’s succeed, we’ve lost too many important retailers already. I wish her all the luck in the world."

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